Modify ASIC’s powers: CAMAC

Submissions are being requested after the release of a discussion paper on managed investment schemes that suggests that ASIC’s modification powers should be extended.

The paper, the establishment and operation of managed investment schemes, was released yesterday by the Corporations and Markets Advisory Committee (CAMAC).

It forms the second stage of the committee’s review of managed investment funds. The aim of the review is to contribute to the government’s goal of reducing the regulatory burden on industry.

Vincent Jewell, CAMAC’s deputy director told Wealth Professional that they are calling for submissions on the paper over the next three months.

“We’re trying to focus on the key issues in each area, and we’ll develop a report after that,” he said. “Our aim is to have a very well-informed report.”

Among other things, a common theme of the paper is the possibility of extending the modification powers of the Australian Securities and Investments Commission (ASIC) to allow it to reduce regulatory requirements in appropriate cases.

In particular, CAMAC has taken the view that the regulatory regime for schemes should be aligned with that for companies, unless there are compelling reasons otherwise. Furthermore, ASIC should have the same administrative flexibility in relation to companies and schemes.

The current differing rules for the two structures can be very confusing for people operating in the commercial sector; and it especially makes the functioning of stapled entities – a joint scheme-company structure – too complicated, Jewell said.

“Both schemes and companies are different forms of commercial entities, however sometimes operate in similar ways.”

The discussion paper asserts that currently ASIC’S role in registering a scheme is different in its role in company registration, where it has a discretion to grant or refuse an application.

In practice a company will generally be registered as a matter of course unless there is an obvious defect in the application for registration.

By contrast, ASIC must register a scheme within 14 days of lodgement of the application for registration unless the scheme is deficient in one of a number of specified elements.

The CAMAC paper said that the statutory language leaves it unclear whether ASIC is required to give active consideration to each of the specified elements before granting an application, or whether it has an obligation not to register a scheme if it is aware that one of the specified elements exists.

Jewell said this has led to ASIC giving more active consideration to the scheme registration criteria than it does to the company registration criteria.

He suggests that ASIC are given the ability to permit registration without the need for detailed consideration of criteria, but then ensure it has the power of issuing a stop order if any non-compliance arises.

“It might help bring it a little more in line with companies,” he said.

The registration is just a small part of the overall discussion paper, which covers everything from governance framework, to meetings, and disclosure.

Jewell hopes CAMAC’s suggestions will help streamline operation of the managed investment schemes process to dilute confusion, and save time and money.

“We hope the scheme structure will be brought up to date and the anomalies will be cut out,” he said. “It would be an easier commercial structure to operate.”